This stage requires your party to split into 2. Everyone will need to be used, so take care if putting underlevelled characters on the field. Be also aware that you will not be able to change equipment at all until you reach the room with the magic circle, so get everyone fully-equipped before you go in!
Team A (going right):
Sanae, Mokou, Satori, Marisa, Sakuya. Nitori (Commander)
This route requires a maigc-based team to counter enemies that have physical resistances, hard-hitting attacks and elemental weaknesses. Beware for example of the bamboo monsters, which, after "growing", boast a line attack that one-shot most of my party and left a 180PDEF Mokou with but a sliver of life. They are fire-weak, however, so go wild with fire-based magic. Be also aware of the tentacle monsters (lightning weak), and slimes (red ones and green ones - fire weak).
The boss this team faces has hard-hitting party-wide attacks, but her accuracy rate is terrible. Sanae, with her evade buff, is thus strongly recommended, as is any formation that increases evade (set this BEFORE going through, as yoyu can't after you've switched to the next team). She doesn't seem to have particular resistances to anything but dark, but I personally used Marisa, her MATK buffed up through Byakuren and with 20pts on her astronomy skill tree, Patchouli to increase the land effect of any element and followup with attacks in it after, and Nitori as commander to increase benefit of said buff. I was dealing up to 2000 damage a turn with these alone, and defeated her in this way without too much trouble.
Reimu, Alice, Byakuren, Youmu, Patchy. Aya (Commander)
Max out Alice's "Marrionette Pareil", set your formation to vertical line and AOE shield every turn to counter the high-HP hard-hitting physical attacks.
For the boss, keep that strategy, and also max Reimu's "Barrier" skill tree and use "healing ofuda" on your centre character (preferably Alice) every turn, but the max points will give these spells an AOE - so the spell will heal everyone!
The boss also features party-wide berserk and sleep spells, but you'll find that Reimu's heal spell will also remove such "condition" effects. It is thus ESSENTIAL that you heal EVERY turn - right from Reimu's first go - as there is no way of predicting when these will be unleashed, and you absolutely do not want them on Alice as without her shields, your party will go down very fast indeed. Also give reimu an anti berserk charm, so she doesn't get hit by it herself.
Offence-wise, anyone else will do. The boss has no resistances to anything but light, but I personally used Sakuya, synthed her latest 2-handed sword, maxed said skill tree and used the remainder on "Maid Arts" for an accuracy boost and spammed her 3-attack. Even as one of the underlevelled characters (low 20s), she dealt 450 x 3 damage a pop! Your attacks may be disrupted by the boss' PATAK and ACC lowering statuses though, but don't fret too much over it - as long as Reimu and Alice are keeping your team alive and you've at least one other character dealing her damage, she doesn't heal herself at all - so her 10,000HP will go soon enough!